Ecolab sees net income drop amid economic challenges

Ecolab reported a drop in its fourth-quarter net income in a challenging economic climate.

The St. Paul-based company has been raising prices but is also seeing softening demand for its products, particularly in Europe. High interest costs and less favorable currency translation are also factors.

Sales rose to $3.7 billion, up 9.1% from the fourth quarter in 2022. The company's net income of $264.4 million was down 12.2%. However, its earnings per share of 93 cents topped analyst expectations by 2 cents.

Sales in its industrial division, which accounts for about half of the company's revenue, were up 14%.

The company's stock jumped 7.1% on Tuesday.

"The macro environment remains unchanged. We expect inflation to remain high," CEO Christophe Beck told stock analysts in a midday conference call. "We expect that our costs are going to keep going up."

Ecolab's business includes water, hygiene and infection prevention products. It recently started selling products for the first time in mass retail in a deal with Home Depot.

The company is expanding its cost-cutting in Europe and aims to achieve $175 million in annualized pre-tax savings — more than double its previous target.

But those moves will also cost money. Ecolab said it expects to take pre-tax charges of $195 million connected to the plan to cut expenses. Those charges will come "primarily cash expenditures related to severance and asset disposals, with additional savings expected from not filling open positions."

Interest costs related to Ecolab's $3.7 billion acquisition of life sciences company Purolite in December 2021 also add financial pressure.

"Reported interest expense increased 56% reflecting debt issued to fund the Purolite acquisition and the impact from higher average interest rates on floating rate debt," the company said.

For the full year 2022, Ecolab made $1.1 billion — down 3% — on revenue of $14.2 billion, which was up 11.4%.